The Biggest Mistakes Made in Hiring Sales People

Companies typically spend more hiring their sales forces than any other function in an organization, yet sales managers often aren’t adept at assessing the right skills to make good hires. It’s time to turn that around in order to drive better bottom-line results.

AB:When it comes to hiring the kind of sales people that will help organizations to better align strategy and sales, what should hiring managers look for?

FC: That’s a great question. Everybody talks about talent management, and I’ve yet to meet the executive who is “against” talent! But far fewer confront a basic fact: companies typically spend much more money and hire many more people, annually, in their sales function than they do anywhere else in the firm. Most people are surprised to know that even at online companies like Facebook, Google and Groupon, a much higher percentage of employees work in sales than in engineering or data mining.

Understand the sales tasks that have high strategic impact.Some activities exhibit high performance variability but have little strategic impact. Think about PowerPoint presentations: some people are much better than others in doing this, but how much impact do the slides have versus other sales tasks? Other activities may be strategically important but have relatively little performance variability – because the tasks are standard, because technology has reduced variability, or because the business model limits the range of performance variance. Think about the difference between sales personnel at Nordstrom, where personalized service and advice are key to strategy execution, and Costco, where low price and product availability make selling activities less complex and variable. You want your stars in those areas that exhibit both high impact and high variability.

Focus on how the salesperson makes a difference. Continually ask, “Where are we spending too much—and too little – time, money, and talent across our sales tasks?” Those tasks will change as the market changes. In subscription-based businesses like software and many consumer web services, key tasks early on are about customer acquisition. But as the market matures, key tasks tend to shift toward account management, reducing churn and up-selling or cross-selling additional services. Hiring and allocation of sales talent should change.

Focus on behaviors in selection. Managers are excessively confident about their ability to evaluate candidates via one or two interviews. Studies across job categories indicate only about a 14% correlation between interview predictions and job success. This is especially true in sales.

Many sales managers hire in their own image because how each manager sold is what got him or her promoted and in a position to hire. But the best results occur when you observe the relevant job behaviors. Technology is making this more possible and affordable via game-like simulations, virtual video environments and online media.

The real constraint in many firms, however, is the lack of assessment skills by sales managers. This makes links between sales and HR important. Sales managers know (or should know) the key sales tasks. But HR managers typically know more about the tools, techniques, and options for assessing behaviors relevant to those tasks.

AB:The economy is beginning to grow stronger. How does that add to the challenge of implementing the changes you call for?

FC: Well, let’s hope the economy is growing stronger. It’s been a shaky, stutter-step recovery for years. A stronger economy is good news for society, but it does add to the challenge of aligning strategy and sales.

For one thing, it puts more pressure on hiring. Across industries, average annual turnover in sales organizations is about 25%, and higher when times are good and there are more job opportunities. This means that the equivalent of the entire sales force must be replaced at many firms every four years or so. That time frame shrinks if companies increase their revenue targets in a recovering economy.

Also, the prolonged recession had an impact on firms. During the past decade, the average S&P-500 company, of necessity, reduced its cost-of-goods-sold by about 250 basis points. That’s significant. But SG&A (selling, general, and administrative costs) as a percentage of revenue has not declined. Business success is about relative competitive advantage. The focus of productivity improvement is moving, quickly, from operations and back-office activities to customer-acquisition activities.

Finally, even a growing economy can take any company just so far. It’s tough to do good things in business without a strategy, and it’s even tougher to achieve growth goals without a sales force aligned with that strategy. Too many companies either ignore this truth or fail to deal actionably with what’s required to make it happen.